Social Security payments will see a COLA increase of 8.7% in 2023, which could mean bigger payouts for the Social Security benefits recipients.

Around 70 million Americans are seen to benefit from the 8.7% COLA increase in 2023 while more than seven million Supplemental Security Income beneficiaries could see a hike payout as early as December 30, 2022.

With inflation, many retired Americans were left in a tough spot with the price hike of basic goods becoming one of their biggest financial concerns.

The COLA increase will help retirees cushion the effects of inflation. However, there are concerns regarding the COLA hike in 2023 for Social Security payments.

READ NEXT: SNAP Benefits Update: Who Is Eligible To Get Extra $95 in January 2023?

Social Security Payments and COLA Increase

Social Security benefits were at first exempt from federal income tax, but Congress changed the law in 1983, which allows the taxation of benefits for individuals meeting a certain threshold.

In 1993, a second higher threshold was added.

Beneficiaries who derive all of their income from Social Security will not pay taxes on benefits. However, that will not be the case for those with additional sources of income, such as a job, 401k distributions, or traditional IRA distributions.

For single taxpayers, if their combined income is between $25,000 and $34,000, Social Security benefits are taxable for up to 50%.

For those with a combined income exceeding $34,000, Social Security benefits can be taxed for up to 85%.

Married taxpayers filing jointly with income falling between $32,000 and $44,000 can have their Social Security benefits taxed for up to 50%.

Beneficiaries who will be taxed can either make quarterly estimated payments to the Internal Revenue Service or request federal taxes to be withheld from benefits by filling out a Form W-4V.

Aside from owing taxes, the COLA hike in 2023 can also deplete the Social Security trust fund earlier than expected.

Budget experts cautioned that the agency's funds could run out before 2034 due to larger benefits distributed.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, warned that the COLA hike is "likely to bring the year of insolvency forward by a full year."

Anqi Chen, Center for Retirement Research at Boston College assistant director of savings research, said that the effects of COLA increase depend on wage growth and the labor force.

Social Security Benefits

Social Security Administration announced that the average benefit check will increase to more than $140, resulting in $1,827 per month as compared to the 2022 benefit worth $1,681.

SSA noted that people receiving SSI will get their first 2023 payment on December 30 this year as January 1 is a holiday and December 31 falls on a Saturday.

Workers with disabilities will receive an average check worth $1,483 while senior couples both receiving benefits will get an average check of $2,972.

A widower without any children is eligible to receive a $1,704 check while a widower with two children can receive an average check of $3,520.

READ MORE: Disaster SNAP Benefits Update: Are You Eligible for New Florida Payments?

This article is owned by Latin Post.

Written by: Mary Webber

WATCH: Social Security benefits could see largest cost of living increase since 1981 - from Yahoo Finance